Trade Alert: Three Money-Making Trades to Place Now
Stocks saw mixed results last week, but I'm seeing more definite signs of a shift in leadership toward some of the market's most down and out sectors: one of which we're targeting with cash-covered puts, as I recommend below.
The S&P 500 advanced marginally for the holiday-shortened week, with a gain of just 0.4%; the Dow (DJIA) performed somewhat better: up +.8%; but the former leaders in the tech-heavy Nasdaq 100 Index slipped lower by 0.3%.
And in yet another sign of shifting market leadership, last week's biggest winners were among some of the poorest performing sectors:
Stodgy old utilities led advancing sectors with a 2.8% gain.
Real estate jumped 2.3% and, similarly, energy jumped 2.2%.
Meanwhile, healthcare (up 1.6%) and financials (up 1.7%) picked up nice assists, while technology was MIA with an 0.8% decline.
I'm keeping a very close eye on this ongoing shift in leadership, and you should be, too.
You can see this clearly in the charts below for the Materials Select Sector SPDR ETF (XLB) and the Energy Select Sector SPDR ETF (XLE). Both have had lackluster returns. But in recent weeks these heavy cyclical sectors have come alive, and as you can see below, they are very close to breaking out to new all-time highs:
In addition to already favoring the energy, healthcare and financial sectors, I'm also considering put-option trades on select utility and real-estate stocks to buy at a discount.
Speaking of energy, Ultimate Income members have been aiming to buy shares of Coterra Energy (CTRA) at a discount with cash-covered puts – but, so far, no luck. So, let's roll our existing CTRA put to have a better chance of getting put the stock.
Also, two other current portfolio holdings, Cisco Systems (CSCO) and VanEck Gold Mining ETF (GDX), both look good for writing covered calls, as indicated by our Trade Cycles market timing tools. Here's what to do:
Actions to Take...
1. Buy to close the CTRA April 19, 2024, $24 put option (CTRA240419P00024000) and at the same time sell to open the CTRA May 17, 2024, $25 put (CTRA240517P00025000) for a credit of $0.15 or more, good 'til canceled.
Note: Aim to buy back your existing put option for about $0.05 or less and sell the new option for $0.20 or more, resulting in a $15 net credit.
2. Sell to open the CSCO May 17, 2024, $55 call option (CSCO240517C00055000) at a limit price of $0.25 or more, good till canceled.
3. Sell to open the GDX April 19, 2024, $35 call option (GDX240419C00035000) at a limit price of $0.25, good till canceled.
Place these trades right away and keep watch for more Ultimate Income trades likely this week, plus more market and portfolio updates soon.
Good investing,
Mike Burnick Senior Analyst, Ultimate Income
P.S. If you have any questions or concerns, please reach out to me at emailmikeburnick@tradesmith.com and include "Ultimate Income" in the subject line.
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